Just a day before the US Federal Reserve disappointed investors by failing to signal a faster rate tightening schedule at the conclusion of its March FOMC meeting, traders were scaling back their bets looking for further Australian dollar strength.
According to analysis from ANZ, using data provided by the US Commodity Futures Trading Commission (CFTC), net speculative long positioning in the Aussie fell by $US1.2 billion to $US2.9 billion, leaving it at the lowest level in five weeks.
Net speculative positioning is simply the sum of long positions in options and futures less short positions reported by the CFTC for non-commercial accounts. A net long position suggest that traders, as a whole, are looking for a particular asset to strengthen.
Here’s how net speculative positioning in the Aussie compares to recent movements in the AUD/USD.
While net long positioning in the Aussie dollar was trimmed, ANZ said that it increased in the US dollar over the same period, swelling by a further $US1.5 billion to $US16.6 billion.
The data from the CFTC is a snapshot of market positioning as at the end of trade on Tuesday, March 14.
Just a day later, the Fed released updated economic projections at the conclusion of its March interest rate meeting, including individual FOMC member forecasts on the outlook for the Fed funds rate.
The median forecast for interest rates was largely unchanged from those offered in December, disappointing those who had been expecting the Fed to signal a faster rate hiking schedule in response to improving economic data and the prospect of increased fiscal stimulus under the new Trump administration.
As a consequence, both US bond yields and dollar fell.
On what is an otherwise quiet session on Monday, the news that long positioning in the Aussie was scaled back last week — and increased in the US dollar — may be contributing to renewed strength in the AUD/USD as prior positioning adjustments are unwound by some traders.
The AUD/USD currently sits at .7725, having hit a four-week high of .7729 earlier in the session.
The US dollar index, or DXY, is currently down 0.15% at 100.15, extending its decline from the high of last week to over 1.6%.